H&M Calls for Yearly Minimum Wage Review

The call for a higher minimum wage in Cambodia’s garment industry by Swedish clothing giant H&M, which posted a 2012 profit margin of more than $3.4 billion, should begin with the brand itself as it has the power and means to raise workers’ wages, industry members said Monday.

H&M, the world’s second-largest clothing retailer by sales, has been buying from suppliers in Cambodia since 1998 and is one of the largest buyers in the country’s most profitable sector—which exported more than $4 billion worth of garments in 2012.

On October 16, H&M CEO Karl-Johan Persson visited Cambodia to speak with Prime Minister Hun Sen about the “urgency of annual wage reviews and functioning industrial relations,” according to a press statement released last week on the brand’s website.

“We believe that the Cambo­dian government should conduct an an­nual review of the minimum wage, taking into consideration national inflation and the consumer price index,” the statement says. “We believe that it is in the interest of the Cambodian textile industry, as well as in our interest, that the industry continues to develop into an advanced and mature textile industry.”

“Stable markets, in which people are treated with respect, and where the workers are properly compensated by their employers, are of the utmost importance,” the statement says.

Mr. Persson’s meeting with Mr. Hun Sen comes after the government has publicly announced that it is considering a wage raise for garment workers after the ruling CPP suffered massive losses during the July 28 national election.

According to H&M spokeswoman Anna Eriksson, H&M makes $18.6 billion in retail sales and posted a profit of $3.4 billion last year. She agreed that any change in the government-mandated minimum wage should start with the brand.

“We have to ensure that our purchasing processes enable our suppliers to live up to our de­mands by providing fair lead times, fair pricing, on-time payments and clear communication,” Ms. Eriksson said in an email Monday. “We work with them in close partnership to learn from and understand each other and to reward suppliers with good sustainability performance.”

Huon Soeu, deputy chief of the dissolution department at the Ministry of Labor, said Monday that the government is open to raising workers’ wages.

“We hope to hold a meeting at the end of the year to discuss what the raise amount would be,” Mr. Soeu said. “[In the past], we have raised the wages for the workers from $40 to $80 a month, but the wage has not yet reached the amount that they want.”

David Welsh, country head of the Solidarity Center—which advocates for labor rights—said there have been “positive” meetings with the government on raising the wage, and that H&M needs to stay committed to Cam­bodia even if the price of their suppliers’ products increases.

“It is a positive development [for H&M to propose this] but it’s not like the brands have no role in this. In fact, they have a primary role in it,” Mr. Welsh said. “They are the ones…who are able to direct the industry and reassure the government that they won’t cut and run if [the wage increase] happens.”

“It’s important that the brand is not saying one thing publicly and then continue squeezing garment factories here on the ground,” Mr. Welsh said.

Ken Loo, secretary-general of the Garment Manufacturers Association in Cambodia, echoed this, adding that the brands dictate the price they pay to suppliers.

“Ultimately, the buyers would have to shoulder the majority of the responsibility,” Mr. Loo said, adding that it is unclear if H&M will begin paying their supplier factories more. “Of course they can pay more, they have the ability to pay more. It’s a question whether they want to pay more.”

Ath Thon, president of the Coalition of Cambodian Apparel Workers Democratic Union, appealed to buyers to take a small profit cut for the workers’ sake.

“When it comes to the increase, the brands only need to cut a bit of their earnings, and then workers can get $150 a month,” he said. “If the brands and companies do not care about it, workers will be hopeless and they will not produce for companies and they will leave the sector.”

Oeun Samol, compliance supervisor at New Archid Garment Factory in Kandal province—which produces clothing for H&M—said that the latest wage raise to $80 was not met by an in­crease in prices for the goods they produce for brands.

“As you can see it is a competitive time now so sometimes they want us to lower the price because they say it is simple designs [for the goods],” Mr. Sam­ol said, adding that he would welcome H&M to pay more for the goods.

“If our price is higher, we would be able to pay the workers a little more.”